Don’t tax you, don’t tax me, tax that Bitcoin behind the tree

January 4, 2018 (Windy Hill Beach, South Carolina) — A newspaper story out of Europe today reports an EU official’s opinion that Bitcoin is not a currency (rather, he sees it as a means of speculation and money laundering), and that Bitcoin should be taxed via the EU’s Value-Added Tax (VAT).

When friends contrast cryptocurrency with “real money”, I’ve often talked with them about the definition of money, and how fiat currency, such as the US Dollar, doesn’t do too well in meeting one aspect of that definition. I’m referring to money as being a store of value. The US Dollar’s value has been severely inflated away since the Federal Reserve was established in 1913. If your great grandparents put $100 under their mattress in 1913, over 95% of its value would have been inflated away in the years since. That doesn’t seem even minimally adequate to meet the “store of value” criteria in qualifying something as money. One of the design features I like about Bitcoin is that its value will not be inflated away by creating more Bitcoin (after the 21 million design limit of Bitcoins are mined). That means no inflation. And in that sense, Bitcoin better deserves the designation “real money” than does any fiat currency.

A top European Central Bank official on Wednesday called for governments to regulate and tax bitcoin, labelling the cryptocurrency an object of speculation and a tool for money laundering. “One ought to apply what the basic rule is in any other financial transaction: everyone involved should reveal their identity,” ECB governing council member Ewald Nowotny told the German daily Sueddeutsche Zeitung. “We need a value-added tax on bitcoin, since it’s not a currency,” said Nowotny, who is head of Austria’s central bank.